BENGALURU: US research firm Forrester has slashed projections for online retailing in India by more than a third to $48 billion by 2020, from $75 billion estimated last year, citing demonetisation, ecommerce restrictions, dwindling funding and slow growth of buyers. Forrester said India continues to be the fastest-growing online retail market, ahead of South Korea and China. US banks Morgan Stanley and Goldman Sachs had upgraded the market size to $70 billion in 2015 and $120 billion in 2016 and haven't revised their projections.

“Government actions, a slow down in venture capital funding, logistics challenges, and slow growth in the number of online buyers are holding back India's online retail market,“ Forrester analyst Satish Meena said in a report.

The move to demonetise high-value currency notes in November led to a slowdown in the sector where over 50% orders are driven by cash on delivery. The government's guidelines for foreign direct investment in ecommerce in March 2016 curbed discounting by marketplaces and set limits for sellers. A market survey of 2,000 respondents by Forrester revealed that after jumping 50% to ` . 29,006 in 2015, online spending per buyer slipped by 17% . 24,092 in 2016. “There are two asto ` sumptions in terms of growth rates (which have not panned out). Verti cals like grocery and furniture have not picked up significantly, and we expected that discounting will go on for at least one more year,“ sa id Meena, adding that while the market was expected to expand 7080% in 2016, it grew by about 30%.

According to investors and analysts, the online retail market stood at $14-16 billion at the end of 2016 from about $11 billion in 2015.

The slowing market is reflected in the gross value of merchandise sold on the online platforms of companies including Flipkart and Snapdeal, which are also finding it hard to raise fresh funding at existing valuations. Flipkart, India's largest online retailer, hasn't been able to cross the $5-billion mark in gross merchandise value after surging from a $1-billion annual run rate in 2013-14 to $4 billion in 2014-15.

Snapdeal's GMV shrank from a peak in 2015 as the company switched to focussing on profitability. On the other hand, Amazon India has been investing aggressively, after its US parent increased commitments to the local market from $2 billion to $5 billion in June 2016. While Amazon India's shipments more than tripled in 2015, the pace of growth slowed to over 100% in 2016.

Sponsored Stories

Subscribe to our Newsletters

The move is expected to give Domino's an edge over rival pizza brands and QSR chains, but some experts warned that it may prove to be a tough promise to live up to and raised concern that it would put unnecessary pressure on delivery boys.